Financial markets tumbled as protests erupted across Europe at the human cost of painful cuts as new EU rules to prevent national governments bowing to pressure over unpopular cuts were tabled in Brussels.

Spain was gripped by a general strike, in Greece doctors and rail workers walked out and the Irish parliament was blocked with a cement truck to protest at the high cost of bank bailouts at a time of deep cuts to public spending. Brussels was paralysed by 100,000 trade union demonstrators from 24 countries, including Britain.

As protests mounted, the European Commission proposed new measures threatening euro zone countries, such as Spain and Ireland, with multi-billion fines if they did not hold firm on budget cuts aimed to stop a Greek-style debt crisis tearing the European single currency apart.

Following massive protests in France last week and as demonstrations spread to Slovenia and Romania earlier this week, Spanish pickets took to the streets to protest against EU-linked austerity measures in a 24-hour general strike, the country's first in eight years.

Air travellers were worst hit by the strike with an estimated two-thirds of all flights to and from Spanish airports disrupted. British holidaymakers were among those stranded at airports across mainland Spain and the islands of Majorca, Ibiza and the Canary Islands.

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Travellers have been forced to camp out at airports until normal services resume when strike action ends at midnight tonight.

Scuffles broke out between police and strikers at factory gates across Spain with reports suggesting that at least 15 people were injured nationwide. Spanish unions said 10 million people, or more than half the workforce, had joined the action and claimed the first general strike in eight years was an "unquestionable success".

The strike was triggered after Jose Luis Rodriguez Zapatero, Spain's Socialist Prime Minister, introduced severe austerity measures in a bid to bring down the budget deficit from 11 per cent last year to within the a three per cent of GDP limit set by the EU by 2013.

The European Commission, concerned that some eurozone governments are wavering in the face of mass protests yesterday (WEDS) moved to introduce huge fines if national governments failed bring their public spending within levels set by the EU.

Under the plans, national treasuries of euro zone will have to deposit billions in Brussels with the cash becoming forfeit if the government then failed to convince the EU it was carrying out austerity measures. For Spain the price of disobedience would cost £1.8 billion in fines at 0.2 per cent of GDP, for France the penalty would be £3.4bn.

While France is unhappy with the idea of overriding elected governments, Germany has thrown its weight behind the measures to "depoliticise" austerity.

José Manuel Barroso, the Commission President, insisted that high public debt in Greece and mistaken economic policies in Spain and Ireland had shown that governments could not be trusted to take difficult or unpopular spending decisions on their own.

"Governments are not always right. If governments were always right we would not have the situation that we have today," he said. "Decisions taken by the most democratic institutions in the world are very often, or can be, wrong."

Poul Nyrup Rasmussen, former Danish Prime Minister and leader of the European Socialists, accused the Commission of lacking "an understanding of how ordinary people are suffering from this crisis".

"There is a complete absence of democratic sensitivity. People want an approach that promotes job creation not imposed sanctions from on-high," said.